Strategic Analysis of Airbus and Boeing in the Aerospace Industry

BUSIESS STRATEGY

MANAGEMENT 1
Introduction
This report is based on the process of strategic analysis which is used by the companies to
develop the strategies. Porter’s Five Forces Analysis is used to analyse the external
environment of the companies Gans (1). In this report, the case study of Airbus and Boeing
has been taken into consideration to analyse the environment. Airbus and Boeing are the
manufacturing companies of Aircraft. These are operating under the aerospace industry
which design, manufacture and deliver the aircrafts to the companies.
Porter’s Five Forces Framework Analysis
Porter’s Five Forces Framework Analysis is a tool which is used by the companies to analyse
the external environment forces. It helps to identify the competition level in the market in
order to beat the competitors by developing the strategies Greiner and Julian (2) As this case
study is based on the growth of the companies in the industries that is why, it is an
appropriate tool for this situation because it helps to analyse the position of the company as
well. The factors which included the different factors and these are as follows:
The threat of new entrants
This force helps the companies to analyse the threat of new entrants in the market. It has
been analysed that the companies have low level of threat of new entrants just because of
high capital requirement. According to the case, the companies require the commercial cost
to bring the new aircrafts in the market. It is difficult for the new entrants to bring the large
amount to develop the aircrafts. Boeing invests $18 to $20 million to develop the latest
aircrafts in the market. Risk is the factor which affects the new entrants to enter the market.
According to Hill, Schilling, and Jones (3), the companies also have the risk in the industry

MANAGEMENT 2
due to high value of goodwill in the market. It is observed that only Boeing and Airbus have
the capability to develop the new large commercial aircraft.
Bargaining Power of suppliers
Bargaining power of suppliers states that negotiation power of suppliers while providing the
raw material to the companies Mordern (4). The bargaining power of suppliers is low due to
less number of companies in the market. According to the case study, the cost of equipment
of aircraft is high which cannot be delivered by large number of suppliers.
Bargaining Power of Consumers
This force helps to evaluate the negotiation power of consumer while dealing in the goods
and services. It has been seen that the bargaining power of consumers is low due to less
number of companies and the high quality of services. As per the case study, it has been seen
that the demand of new aircraft is determined by the demand of air travel. The
manufacturing costs of the aircrafts are high due to which the companies offer the high prices
to the consumers. As there are less numbers of companies, the consumer have no other option
to take the similar services with the other companies in the less amount.
The threat of competitors
This force helps to analyse the threat of competitors to the companies in the market as per
their market position. Airbus and Boeing have lower level of threat of competitors just
because of less number of new entrants. The three companies enter the market with the small
narrow bodied jets with the 100 seats capacity which reflects the growing situation of the
industry Zhao, Zuo, Wu PH, Yan, Zillante (5). The companies are coming to gain the market
share but Airbus and Boeing develop their own agencies to compete the competition.
The threat of Substitute